Smith buys and sells securities. On December 15, 2018, Smith purchased $507,000 of Jones shares and elected the fair value option to account for the Jones investment. As of December 31, 2018, the Jones shares had a fair value of $606,000. In the 2018 financial statements, Smith will report (ignore taxes):

(A) Other comprehensive income of $99,000.

(B) An investment in Jones of $507,000.

(C) Accumulated other comprehensive income of $606,000.

(D) Investment income of $99,000 in its income statement.

Question

Mariam Vang

Business

6 January, 15:44

Smith buys and sells securities. On December 15, 2018, Smith purchased $507,000 of Jones shares and elected the fair value option to account for the Jones investment. As of December 31, 2018, the Jones shares had a fair value of $606,000. In the 2018 financial statements, Smith will report (ignore taxes):

(A) Other comprehensive income of $99,000.

(B) An investment in Jones of $507,000.

(C) Accumulated other comprehensive income of $606,000.

(D) Investment income of $99,000 in its income statement.

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Answers (1)

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Brooklyn Mclaughlin · Answer 1

(D) Investment income of $99,000 in its income statement.

Explanation:

As Smith buys and sells securities, so the gains arising from the sale of securitiesand share will be reported as Investment Income in the income statement. All the stocks that purchased for trading purpose are reporting on fair market value and all the gains and losses are recorded. The Gain of $99,000 arising from the fair market value adjustment will be reported to income statement.